The impact of drought and water scarcity on irrigator farm exit intentions in the Murray-Darling Basin

Abstract

Drought and future water scarcity in the Murray–Darling Basin (MDB) will continue to restructure the irrigation industry in the coming decades. There has been little work conducted in Australia that has modelled farm exit or exit intention. ABARES farm survey data were used to model irrigators’ farm exit intentions across the southern MDB from 2006 to 2013. In particular, we examined the hypotheses that drought and water scarcity positively impacted on farm exit intentions and that it is the poorest performing farms that intend to exit in times of drought. Results revealed that water scarcity impacts varied considerably. There was only weak evidence to suggest that irrigators’ exit intentions were higher in times of drought, but there was stronger evidence to support the influence of a lagged water scarcity impact on farm exit intentions during periods of nondrought (e.g. intending to exit at times when the property market was less depressed). There was also strong evidence that poorer performing farms (measured by rates of return and higher debt over a certain level) were more likely to have exit intentions in drought periods, but not necessarily so in nondrought periods. Older age is the most consistent predictor of farm exit intentions across all industries, though it was most significant in drought periods.